Integrated Environmental Management in a German Brewery

Case Study

Name of company: Neumarkter Lammsbräu
Sector: Brewery
Number of employees: 80
Country: Germany

Neumarkter Lammsbräu is an 80-employee brewery located in Bavaria, a German region which has a strong tradition for beer. At the beginning of the 1970s, agriculture in the region became increasingly intensive. The quality of beer was being sacrificed for quick and high returns on sales. Neumarkter Lammsbräu wanted to safeguard the quality of its products and develop a strategy for success. The company realised that it needed to integrate all areas of the brewing process into its management strategy; from the cultivation of raw materials, to the sale of the end product. Since then an integrated management approach has been developed, which includes environmental protection, worker involvement, product quality, and the development of strong links with supplying farmers. Over the years, the company has developed guidelines for organic farming, and developed its own life-cycle analysis and eco-controlling procedures. Since 1993, the company has published an annual environmental report. The company has also been certified under the quality standard ISO 9001, and is registered to the European Union's Eco-management and Audit Scheme (EMAS). Neumarkter Lammsbräu has led the way for many SMEs in Germany and is continuing its pioneering efforts.

Country Overview
The social and the economic climate in Germany have changed considerably since Reunification in 1989. The 1990s have brought economic depression and increasing unemployment. Reunification presented the country with both problems and opportunities. Due to massive monetary aid of approximately DEM 150 billion per year, the 'Länder' or states in former East Germany have undergone major modernisation. The problems of unemployment, and social divisions caused by differences in living standards have accompanied Reunification. The former Eastern states also face major environmental problems, especially soil pollution.

Since the 1970s, Germany has developed environmental legislation which initially concentrated on air, water, soil, etc. German environmental legislation is generally in correspondence with that introduced by the European Union. The regulatory system has now begun to deal with issues in a more integrated way. Market instruments such as the packaging waste ordinance have been introduced, and the effectiveness of the regulatory approaches is constantly under review. Industry, however is often unable to deal with the huge amount of environmental legislation with which it has to comply. Now, in times of economic crisis, cost-cutting is becoming a priority in companies, and environmental protection is becoming less important in terms of industry priorities. On the other hand, Germany has become one of the world's leaders in environmental technology.

Sector Overview
Germany is a country renowned for its beer. The German brewing industry bases its central marketing strategy on the purity law which was introduced in the German state of Bavaria in 1516. Over the last 20 years the German, and in particular the Bavarian brewing industry, has become increasingly concentrated. This development has not left Bavaria, traditionally a beer brewing state, unaffected. Although total beer sales have remained unchanged, many small and medium-sized brewers have had to shut down. Over the last decade the number of brewery closures has been between 30 and 50 per year. The advantages of a decentralised sector structure have been inevitably lost and environmental damage is on the increase.

Company Description
The Neumarkter Lammsbräu brewery has been in the Ehrnsperger family since 1800. Today the brewery is run under the sole proprietorship of Dr. Franz Ehrnsperger. The brewery has 80 employees. With an annual turnover of DEM 17 million, and a drinks output of about 80,000 hl, the company is a typical medium-sized Bavarian brewery. 50 per cent of its customers are in the gastronomic trade, 35 per cent are specialist shops, and the remaining 15 per cent of customers includes canteens and health food shops.

Driving Forces
Neumarkter Lammsbräu recognised at an early stage that a long-term strategy was needed to enable it to survive. The original aim of the business concept developed by Dr. Ehrnsperger at the end of the 1970s was to survive the competition going on within the brewing sector, and to safeguard the company's long tradition for quality. This commitment can be traced back to the centuries-old tradition of the purity law, which is the world's oldest foodstuffs law, and is now also applied in the area of consumer rights. For Neumarkter Lammsbräu the purity law meant that the company had to integrate all areas of the brewing process into its management strategy: from the cultivation of raw materials, to production processes, to the sale of the end product.

The brewery was also influenced by trends in the primary sector. The situation of the raw-material sector in Germany in the 1970s was characterised by the use of chemical fertilisers to increase yield, and the use of pesticides. The opinion in expert circles was that one could not do without chemicals in agriculture. The entire industry was geared, from raw-material production to beer-brewing, to achieve a quantitative growth, with maximum returns. The move towards intensive farming has been greatly responsible for the pollution of the most important raw material for the brewing process, water.

In the context of the changes in agriculture, and the resulting environmental degradation and damage to raw materials, the brewery wanted to explore alternatives for its operations. They felt that business principles previously formulated were outdated and that new business guidelines were needed, guidelines which consider more than purely linear quantitative growth. The business approach developed by the company on the basis of these guidelines distinguishes the company from other brewers, and it has been able to create its own environmental market niche.

Problem Definition
Using an integral approach which took account of the farmer, the brewer and the beer-drinker, the brewery was able to implement strategies step-by-step. Neumarkter Lammsbräu's motto is 'the purity law is applicable from the field onwards'. This goal was fully achieved last year when the brewery changed over to ecological production methods for its ninth type of beer.

The main areas to be tackled were outlined by the brewery as follows:

  • influencing the cultivation of raw materials for beer;
  • support for organic farming, thus contributing to qualitative improvement of raw materials and conservation of the environment;
  • offer and guarantee of the highest possible satisfaction for customers, and;
  • contribution to the stabilisation of the sector and workplaces in its region.

In order to brew organic beer, organic raw materials must be used. At the beginning of the 1970s, there was not a single organic farm in the entire Neumarkt district. Neumarkter Lammsbräu employees and an agricultural engineer were employed to convince the farmers that organic farming is worthwhile. The brewery benefited from the fact that it made direct supply contracts with the farmers. The farmers in turn benefited by having a guaranteed market for their organic raw materials. The experiences gathered in the early years were often painful. Neumarkter Lammsbräu had to part with those employees, partners and customers, who were not willing to accompany it on its path to sustainable business. The first small-scale attempts to brew organic beer were made in the brewery's subsidiary, Hausbrauerei Altstadthof in Nuremberg in the early 1980s. The Neumarkt parent company was only able to change over to fully organic raw materials, and therefore, to 100 per cent organic production, after a few years.

At Neumarkter Lammsbräu the barley and hops are now all supplied by organic sources. Malt and yeast are processed in the brewery itself, and water is used from the brewery's own well containing water 'of unspoilt purity'. Artificial fertilisers, chemical pesticides, sulphured hops, hop extract and hop powder are not used at Neumarkter Lammsbräu. In contrast to other brewers, Lammsbräu does not permit the use of protein stabilisers and preservatives such as silicic acid preparations. At the same time the whole company was examined for environmental weak points in order to achieve the set objectives and to arrive at what could be described as an integrated system. Heavy heating oil was replaced by environmentally-friendly natural gas to supply the remaining energy. The greatest environmental weak-point today is the fleet of vehicles: 15 lorries still use diesel. By the year 2000 the brewery aims to have changed the fleet of vehicles over to vegetable oil.

Various measures introduced in the last few years have helped the brewery to constantly make improvements. These are described below.

1.- Guidelines for the brewing of beer from organic farming

In 1989, Neumarkter Lammsbräu became the first brewery to establish criteria for the brewing of beer from organic farming in order to document a uniformly-orientated brewing philosophy.

2.- Goods flow control

With the help of an information technology-supported goods flow system the entire production process, from seed choice to delivery of the finished beer, is under the company's control.

3.- Life cycle assessment

In 1991, an LCA procedure was developed with the support of the Bavarian Department of the Environment, and in co-operation with an environmental management consultant, and the University of Nuremberg. The procedure features a systematic and comprehensive weak-point analysis of the business. From cultivation to production and logistics, all steps are evaluated.

4.- Eco-controlling

On the basis of the first LCA an eco-controlling report was presented for the first time in 1993. The aim was to check and analyse environmental performance in relation to aims set out following the LCA. The prerequisite for the introduction of this system was the in-house developed information technology system.

5.- Integration of quality management into company environmental protection

In 1994 Neumarkter Lammsbräu decided to introduce a comprehensive quality management system according to ISO 9001. The company interprets quality not just as product quality, or meeting customer's demands, but as a comprehensive term, which includes the protection and conservation of the environment.

6.- EMAS

Neumarkter Lammsbräu achieved registration under the European Union's Eco-management and Audit Scheme (EMAS) in 1995.

Experienced consultants were engaged to assist with the implementation of environmental management. A company environmental committee consisting of 13 environmental officers was established to accompany the introduction of the central management tool, eco-controlling. Since 1995 Neumarkter Lammsbräu has had an environmental consultant who co-ordinates and manages the continuous improvement process in liaison with the management.

Over the years the brewery has relied heavily on co-operation with its employees. Developments would not have taken place so quickly and successfully if employees had not been convinced that the brewery had taken a step in the right direction, and had not shown their commitment and willingness to take on responsibility. Due to training and information provision, the employees became the management's most important partners. The workforce is informed about the latest developments in environmental protection and participates regularly in internal and external vocational training. An eco-library has been made freely available to each member of staff. Employees' suggestions for environmental improvements are incorporated into the company's programme.

The exchange of operational problems and experiences helps management to avoid entrepreneurial blindness and broadens the intellectual horizons. Environmental protection forms a part of every employment contract today. The company has also developed various measures for extensive external communications. The annual publication of an environmental report shows the public exactly how much progress is being made.

From the beginning of environmental protection at Neumarkter Lammsbräu, farmers were seen as the partners of the brewery. An agricultural engineer employed by the brewery developed farming strategies for individual farms to switch from conventional to organic farming. The engineer is no longer needed as the farmers have gained enough knowledge and experience to be able to continue on their own. Neumarkter Lammsbräu farmers are now joined in their own regional producer group (EZOEB). Continuous support is extended to these farmers by the brewery's raw material expert. Fair contracts for barley, wheat and hops ensure a continuing successful partnership.

The brewery has achieved great internal and external advantages with its development of an environmental strategy. Employees greatly identify themselves with the company, creating a highly committed team with very low fluctuation of personnel. Numerous awards have not only increased motivation, but have ensured that Neumarkter Lammsbräu is known beyond Germany. Below are examples of various awards which Neumarkter Lammsbräu has received in recognition of its pioneering efforts.

1990: Selected 'Eco-Manager of the Year' by the magazine 'Capital' and the 'World Wide Fund for Nature' (WWF)

1992: Awarded the Bavarian Environment Medal

1993: Awarded the 'Impulse' Environment Prize

1994: Institute for Ecological Economic Research (IÖW) award for the best German environmental report

1996: Award for the best European environmental report by an SME from the Association of Certified Chartered Accountants (ACCA), London
Due to the higher costs of cultivating organic raw materials, the end product, beer, also increases in price. However, consumers are now willing to pay a higher price for organic products. Due to this recognition from its customers, the company has been able to defend its position in the market.

Neumarkter Lammsbräu has invested approximately DEM 2 million in environmental protection during the last few years. Seen over a period of years this financial commitment has reaped benefits: Neumarkter Lammsbräu has not been driven out of the market and is in a strong position economically. And last but not least, it is practising effective environmental protection: each crate of organic beer protects 7m2 of land.

In 1989 Neumarkter Lammsbräu became a member of the German Environmental Management Association (BAUM). BAUM is an organisation set up by entrepreneurs in 1985 which aims to help companies to combine environmental friendliness and business success in their management. In September 1994, the brewery became one of the founding members of the working group for eco-foodstuff producers (AÖL). The aims of this working group are to exchange knowledge and experience gained in the area of ecology, especially organic farming, and to reach new understandings and synergies.

The Future
What Neumarkter Lammsbräu has achieved in its pioneering role is not only possible for other companies, it is also crucial when seen on a global scale. Environmental protection is becoming increasingly important. However, further measures for practising environmental protection in companies can only be taken if technology is constantly further developed. Technicians who have internalised the thought of environmental protection and have practical experience in putting these thought processes into practice, are needed to achieve this. Entrepreneurial courage is vital for developing visions and consistency in following through with them.

This case study was originally published in the INEM Casebook, Case Studies in Environmental Management in Small and Medium-Sized Enterprises, the publication of which was made possible through the financial support of the German Agency for Technical Cooperation (GTZ

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